Xiaomi to roll out 20,000 new retail stores across rural China over next three years to drive smartphone ambitions

Xiaomi will build up its retail network in lower-tier cities and small towns across China’s countryside, which make up 70 per cent of domestic smartphone demand
The Beijing-based company currently operates a network of 10,000 bricks-and-mortar stores in the world’s largest smartphone market

Xiaomi

Xinmei Shen

Published: 7:00pm, 5 Nov, 2021

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Xiaomi will roll out 20,000 more retail stores across mainland China over the next three years to expand its business in the country’s vast rural areas, while helping drive the company’s goal to become the world’s top smartphone vendor by 2024.

That ambitious retail infrastructure programme in the world’s largest smartphone market was revealed by Xiaomi senior vice-president Lu Weibing, who serves as president of China operations, in a post on microblogging platform Weibo on Thursday. Investment details were not given.

The domestic market is Xiaomi’s “base camp”, Lu wrote. He said the company’s plan involves building its offline presence in “sinking markets”, referring to the lower-tier cities and small towns across China’s countryside, which account for 70 per cent of the domestic smartphone market.

Beijing-based Xiaomi, which was initially known for growing local demand for its Android-based smartphones and other products by selling only online, currently operates a network of 10,000 bricks-and-mortar stores across the country.

“Xiaomi won’t aim at surpassing any particular brand,” Lu said in his post. “Since Xiaomi’s goal is to be No 1, it means surpassing all other smartphone brands – including Apple.”

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What's behind Xiaomi's meteoric rise?

The firm’s new retail expansion initiative in China’s rural areas reflects how competition in the smartphone industry remains intense even as Huawei Technologies Co, the world’s largest telecommunications equipment maker and formerly China’s biggest smartphone vendor, continues to struggle because of US trade sanctions.

China’s smartphone market volume reached 76.5 million units in the third quarter, down 9 per cent from a year earlier, amid stagnant local demand and component shortages in the industry, according to a report released last week by Counterpoint Research.

In the same quarter, former Huawei budget handset unit Honor unseated Xiaomi as the country’s No 3 smartphone vendor, according to Counterpoint. Xiaomi had a 14 per cent share of the domestic market last quarter, behind Honor, Oppo and Vivo – with shares of 15 per cent, 20 per cent and 23 per cent, respectively.

“Xiaomi’s position is expected to be challenged the most by Honor,” said Counterpoint senior research analyst Ethan Qi in the report. He indicated that both Xiaomi and Honor have “a higher sales contribution from online channels”, compared to other major Chinese Android smartphone vendors.

Xiaomi censorship issue may spoil firm’s smartphone ambitions

The global smartphone market declined 6 per cent to 342 million units in the third quarter amid the ongoing global component shortages and the slow recovery of key markets such as China and parts of Europe, according to a separate Counterpoint report last week.

It said Xiaomi shipped 44.4 million units last quarter, down 5 per cent from a year ago, because it was “severely hit” by component shortages. The firm ranked No 2 globally behind Apple, which shipped 48 million units in the same period.

While Xiaomi, which released its first handset 10 years ago, aims to become the world’s largest smartphone vendor in three years’ time, it faces more than a few hurdles to reach that goal.

Apart from stiff competition with other major smartphone vendors, the company needs to overcome the current global semiconductor shortage as well as harmful publicity in other markets.

The Lithuanian government’s recommendation in September that its citizens throw away Chinese smartphones, singling out devices from Xiaomi because of their censorship capabilities, raised a red flag for the continued business expansion of these tech companies across Europe.

Xiaomi has denied the allegation, saying its devices do not censor communications to or from its users.

This article appeared in the South China Morning Post print edition as: Xiaomi to roll out 20,000 stores across rural China

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